Analysts say options before Telenor India, the local unit of a Norwegian telco, are few now – one, to buy Tata Teleservices and the second, to buy airwaves from operators exiting the market, failing which Telenor may well be forced to shut shop, as a greenfield expansion is ruled out. Sources say its talks to buy Videocon Telecom’s airwaves in two circles as well as those with the Tatas have run into valuation hurdles.

“They would have benefitted from the Tata scale and a good brand but Tata Teleservices is a loss making entity which has been slowing,” said Kunal Bajaj, a telecom expert who was formerly with Analysis Mason.

“Auctions are getting more expensive as the government clears and gives bigger blocks of spectrum, so it is a tough situation,” he added. “They (Telenor) do have the advantage of lower operating costs (than other fringe players) which if they can leverage they can survive (as a small operation), but it won’t generate the most attractive returns”.

B K Syngal, former chairman of VSNL and now senior principal at Dua Consulting said, the time of greenfield operations has passed.

“The growth will be too slow while incumbents will continue to grab the lion share in the market. Such growth will lend itself to another consolidation in just a couple of years,” he said.

The intensely competitive Indian market is fast shaping into a data market. The introduction of 4G services by the top three players Bharti Airtel, Vodafone India and Idea Cellular and the impending launch of Reliance Jio’s services puts a spanner in Telenor India’s strategy of offering 2G data services at the lowest prices, especially given that it has some 6% of subscriber share and much lesser revenue market share.Moreover, the RCom, Sistema Shyam, Aircel combination in the works will be a strong No. 4 in the current set up, not counting Jio.

Telenor – which operates in Andhra Pradesh, Gujarat, UP (West), UP (East), Bihar and Maharashtra & Goa - though reiterated that its ‘sabse sasta’ strategy has been very successful, saying that within three years of obtaining licenses for the six circles, it has a revenue market share and customer market share of 4% (on an average), and is one of the fastest growing telecom operators. It has airwaves in Assam as well, but hasn’t launched services there.

“We will offer relevant services as and when we feel the market is ready for it and our customers demand,” it said, adding that its network is getting “future ready”. It has airwaves in the 1800 Mhz band in all seven circles - which could be used for 4G - but hasn’t had the network to support the high-speed broadband services so far.

It needs to act fact though, else it faces the risk of completely missing out on additional data hungry customers in a market where 3G is expanding rapidly and even 4G has taken early steps.The telco, which has around 50 million 2G mobile subscribers in six circles, needs to make a decisive move on data growth now, given that it doesn't have 3G spectrum. Its niche ‘sabse sasta’ formula has been increasingly challenged by larger telcos who are dropping rates. For example, in November, Telenor added just over 7 lakh subscribers, compared with Idea’s 3.4 million, Vodafone’s 2.5 million and Airtel’s 2.8 million. And Jio hasn’t even entered the race.

“As a niche player you can compete for a while, but if Jio starts a price war, then survival will be a challenge and any growth plans will go out of the window,” said a Mumbai-based analyst, who declined to be named.

All those close to the company say Telenor’s global chief Sigve Brekke, who oversaw the India launch and was Telenor’s appointed executive to clean up the India situation after the Supreme Court had revoked the company’s licenses, is conservative when it comes to acquisition premium. “He thinks that sooner or later either a distress buy will come up, or a better greenfield opportunity,” said a person familiar.

Telenor is now tipped to be the buyer of Videocon’s airwaves in the 1800MHz band, suitable for 4G service in its strongholds Bihar and Uttar Pradesh (East). Last month Idea Cellular mopped up Videocon’s airwaves in Gujarat and Uttar Pradesh (West).

Analysts say Telenor also has the option to buy surplus spectrum from other operators, for example if the Aircel and Reliance Communications merger goes as per the announced plan earlier this month, the two telcos have overlapping surplus spectrum that may come up for sale.

Telenor could also wait for the government to auction airwaves in the 700MHz band, which has been used for a few 4G deployments around the globe.

No wonder, in its submission to the sector regulator, Telenor India batted for an early auction of the 700 Mhz band.

But it is still uncertain if those airwaves would be auctioned anytime soon, given the opposition from larger players.

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